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Sunday, August 21, 2016

The ELSTAT Case And A Messenger By Name Of Andreas Georgiu

Andreas Georgiu, the former head of ELSTAT, is being tried for having intentionally 'worsened' Greek budget statistics for 2009 so that the EU could impose an extremely harsh austerity program for Greece. The fact that this first harsh austerity program ("Memorandum I") was agreed several months before Georgiu assumed his job at ELSTAT seems to be conveniently immaterial.

Obviously, one always runs 'the risk of not seeing the other side' when one side seems so convincing. In this particular case, however, the views of the 'one side' is entirely convincing that, in Greece, authorities go after those who tried to sort out the mess, not after those who created it.

Of all the commentaries, I find the contributions of the Icelandic journalist Sigrun Davidsdottir the best researched material on the subject. Sigrun's summary is:

"The reason I find the ELSTAT case so interesting and important is that in my view it’s a test case for the willingness of the Greek political class to face the misdeeds of the past, the corruption and all the things that hinder prosperity in Greece. In addition, a country without reliable statistics can’t really claim to be a modern and accountable country.As it is now, Greece is heading towards a political trial where those who fixed the fraud are being hounded and punished, not the perpetrators. As long as the charges against Georgiou and his colleagues are upheld it is clear that the forces who want to keep Greece as it was – weakened by corruption and unhealthy politics – are still ruling. That isn’t only worrying for Greece but for Europe as a whole."

I am not sure that this is correct. The equity which foreign investors brings to a country is typically invested in fixed assets (land/buildings, machinery, equipment). These assets are relatively protected against devaluations: land/buildings are always booked at their historical exchange rate and machinery & equipment typically hold their value in terms of foreign currency (which land & buildings do, too).

Cosco would be a classic case of a huge foreign investment where the investor is not concerned about the exchange rate (but, instead, about a lot of other things with politics topping the list).

But if you wanted to invest in Greek real estate as the obvious "go to" category as an example. Why would you invest from USA/UK any of your funds since the euro currency is projected to eventually end up at $0.70? This would be a 40% devaluation yet to happen. So if your investment goes up by 40% and then you have to convert your sales proceeds to another currency the net effect is zero or negative. COSCO is a very poor example as an investment. That's not an investment; that's a forever purchase of market share by the Chinese who never ever intend to sell. An investor buys and sells relatively quickly (2-3 years). The type of forever investment you are talking about is not real life. In my book Fraport is not an investment. It's a long term lease at the end of which Fraport has nothing to sell because everything reverts back to the state.

I need to correct you: Cosco and Fraport are the best examples of foreign investment because they are in Greece to stay and have significant investment plans. The ideal foreign investment is a "forever purchase", as you describe it.

The 2-3 year investments rank as foreign investments in the Balance of Payments but in actual fact that are nothing other than hot money. Hot money which comes when the sun is out and which retreats as soon as the first clouds show up.

Forever "investments" are not investments. To classify as an investment there has to be a commercial act of buying and then selling. Only the sale of the asset allows you to calculate the correct return on investment. Without knowing what your investment return is you simply do not have an investment. You may have a desire towards investment which remains unrealized until you sell. What you are talking about in the Cosco and Fraport cases are not investments unless of course you are a politician and then you can come up with imaginary concepts and liberal terms on definitions.

I suggest you re-read your last comment a couple of times. With some luck, you will discover the self-contradictions you have made. Whatever books you have been reading about investments, I suggest you read other books. Or better yet, simply ask a businessman.

I do not know from which planet you have been educated on investment. Instead of basing you opinion on here say, i would agree with the blog owner and get some education and read what Fraport/ Cosco are, what there goals are, what their long term investment plan is, what the seek to gain from their investment. Furthermore, from your comments i can understand that you have no concept of what opportunities such investments can bring to those companies while in the meantime help the local economy. 3-4 more investments will change the face of the country. They will come. Trainose, Ellinkos, OLTHessaloniki, OLP.

Likewise Eldorado Gold, may be moving slowly forward due to political speculation (i call brain farts) but they have already invested millions and they will not give up now as it will be a loss on their books. Their permits are valid and mining development will be made once this laughable syriza party shrivels up and dies.

One last point. It is one thing to understand the tragedy that the everyday greek have to survive and deal with and it is another thing to clearly see healthy investments which help our country. Having a socio-communist ideology that all capital investment is bad for the people is plainly immature.

I am a businessman and I can tell you with a high degree of authority that for as long as Greece uses the euro currency there will not be an meaningful investments from the countries/money centers that matter most and have not the euro as their currency.

So as a businessman i can ask you, that leaving the euro currency and going to a new drachma would be wise? It is a good decision? That will bring investment? So it can be devalued every 6 months or so, by the governments as they did pre euro? Meanwhile create hyperinflation?

Just no comment.

I am not happy with the euro currency in the aftermath. But it is what we have and we need to adjust and along with it change our mentality. Going back to a new drachma is just mad.

I am not advocating return to drachma. That's a Greek internal matter and it does not concern me.

I am simply pointing to the fact that as long as the euro currency exists, don't expect investments in Greece from the money centers of the world such as the U.K. and the USA. It would be an act of business stupidity to convert outside of euro currencies by making an investment denominated in euros expecting to make a profit with the euro if you have to covert back to own currency at the end of the investment cycle.

There are investments being made in Greece. Small to medium sized investments mainly but there are investments. Greece may be a country with problems in many aspects but with the market as it is, smart people do invest in Greece. Risky but they do invest.

As Mr. Kastner mentions the currency is not the issue. What i would believe are the 2 main deterrents in Greece, are high taxes for businesses and the government bureaucracy to start and function a business. Capital controls also do not help.

But the positives outweigh the negatives. This is in many sectors. And smart investors do not look at short term gains but long term gains.

As for large investments, well the peripheral airports from frag port, is not a huge investment? How about trainose deal? What about ellinikos? What about Perieaus Port deal. All these sales are tied with job increases large infrastructure investments and solid businesses tying many sectors together. Forgot about ellinikos with Lambda development? Once these large sectors are sold off along with many others that i have mentioned, larger private investors will come.

No Greece will recover and investment will come, unfortunately it will trickle in for now, until the valve finally explodes. I am seeing more and more "betting" investment, that Greece will recover and will be profitable to invest in Greece. I am also betting that recover will come.

The biggest opportunities are when things are at their worst. A simple analogy is is the stock market. when do you buy? when things are rock bottom. Then you wait.

Imagine with a privately owned trainose, as i have stated so many times. Greece will be the import hub for all of Europe. This leads to warehouse needs, which leads to factories, which leads to smaller factories, which leads to jobs etc etc. This couple will be a standard income of revenue for the country.

A seasonal and maybe even an annual income of revenue for the country is the cluster of tourist investments. Peripheral airports, OLP, OLT, Ellinikos, coupled with the hotels of existing and soon to be made. This will be the biggest cluster which will bring back construction, construction relative sectors.

Couple both of these clusters you will need an increased demand to the services market and with that will follow the commercial sales market. This in full motion and Greece will be back on the map and back from the dead. The only question is time. And how long we need to stay on life support.

@ kleingut.The safeguarding of assets value you mention is only valid in developed, civilized nations.Try telling Eldorado Gold about it, and if you don't believe their answers then look at their share price.Or tell the private, foreign owner of Skaramangas (Hellenic Shipyards). Tsakalotos is presently trying to nationalize the company and selling it to COSCO. At the same time claiming that the present owners shall pay the illicit aid of 250 MEUR the previous owners (the Greek state) received. Apart from that,the yard has since the mid eighties received millions of EURO from EU to modernize the machinery and buildings, that modernization never took place. The money went into the daily operation costs, mostly to inflate the wages. We have been here before, political risks comes in all shades and colors. Lennard

I was referrring to the foreign currency aspects of a foreign investment, which typically are not on the top of the list. The political risk aspects like Eldorado, Skaramangas & Co. are very much on the top of the list of concerns of foreign investors and this is why, in my opinion, Greece doesn't get many foreign investments and probably will not for a long time to come.

Yes, Sigrun's articles are a thorough piece of work, all the more astonishing when you consider that he is an outsider. Maybe living through the Icelandic experience taught him what key figures to look for.For those Greeks who cannot suffer to be criticized by a foreigner I can recommend Yiannis Mouzakis in Macropolis.28 Jan 2013, An issue of statistical significance for Greece.6 Apr 2015, What in the world will we do without the barbarians?10 Aug 2016, Justice can't be blind to facts in 2009 deficit case.19 Aug 2016, Greece's 2009 deficit makes a for good conspiracy; shame about the numbers.Their numbers and facts certainly corroborate each other, that is what an impartial prosecution would present. Of cause the conspiracy narrative suit the whole political and popular spectra, it absolves all and sundry of anything, "we are OK, the others did it to us".Even when educated Greeks tentatively criticize the prosecution, like Prof. Papoulatos of Athens University did in yesterdays Ekathimerini, he ascribes it to the present government and "certain dark forces" in ND. That it is the wish/belief of the whole nation is probably too painful to contemplate.Same professor (in economy) has a strange concept of economy. He is telling us how the debt spiraled from 140 billion in 2000 to 300 billion in 2009, "despite the rapid growth". That the debt IS the growth does not dawn on him.Lennard

@V.I am astonished by your optimism, and find it totally unfounded. The main messages I get out of your contributions are:"There are still investments big and small, and many more will come" and "we have reached the bottom, from now on it can only go up".Well fact do not support your view on investments, after the boom year 2006 where net FDI was MEUR 4269 it has gone down, in 2015 it was MEUR -261, a disinvestment.There is no natural or divine law that say that after xx years of waiting and yy number of spoken and written words, then it will turn around. History, and plain math, suggest it will bottom out when productive capacity and living standards have found their equilibrium. Since there have been no concerted actions during the last 6 years to raise productive capacity, living standards will continue dropping until the equilibrium is reached (1980??). The current actions and omissions of Greece only digs the hole deeper. That will continue until such time that the majority start to dig in the right direction.Greek history has been different, continuous cycles of overspending, defaulting and finding new donors. Greece behave in accordance with their history, we all do. Tsipras therefore demand debt forgiveness and is on the second promotion tour to find new donors (China-Russia-USA-Club Med).PS. John Paulson thought it had bottomed out in 2014, he is, with your words, still waiting, mind you, he may feel a little antsy.Lennard

Yes, there are the facts which disprove my optimism and forsight of growth. Even Elstat showed an even slightly larger recession than the initial figure. But you fail to see that Greece in 2006 was in horrible shape in all aspects of a healthy economical society. Much has been corrected since then and as so done through a lot of pain. In a sense Greece did default, not in the manner that it has done in the past but we are in it. An internal default.

Many things had to change to the whole society as to find a basis as to move forward. Those who look forward regardless of the turmoil our governments create for us will succeed. Those who pity themselves will remain in their dismal state.

The major problems of Greece i believe to some extent will end in the few years to come. Inflate public sector, mannerism of business in all sectors, close sectors being opened, problematic pension system, efficiency and clarity as a whole.

Many aspects have and will soon be corrected. The biggest aspect is the privatizations as it kills many birds with one stone. I have mentioned these specific privatization one to many times so i will not go into detail. The specific privatizations requested will reinforce and improve greatly the sectors of tourism, transportation, manufacturing, agriculture and maritime. Everything else will follow.

In a nut shell if we have airports, ports, rail, energy, completed road systems, completed and extended metro systems and transport systems all privatized, Greece will be a new country. And it will be successful. When the right time comes and this government has done the dirty work, they will be booted and things will change. With growth the balance you mention will come and unemployment fall and pension programs will stabilize. BTW a figure which also against what i am stating above is that our exports have also dropped 10% since 2014.

In 2018 we will still be here god willing and am i sure you will remind me of this remark. 10 years after 2008 Greece will be stable.

Indeed, god willing or inshallah. V can pray as much as he wants to, each to his own. My experiences are that if you are at risk of drowning, in addition to praying, you try to swim towards the nearest land or ship,it increases your survival chances.The atheist.

And an insider corroboration of facts in today's Ekat by G. Papaconstantinoy and F. Sachinidis. The timing and the fact that they have an ax to grind stinks, they are jumping the national ship as they see that it's a lost case.

Papaconstantinou and Sachinidis comments confirm the figures we now know, as it is seen from the perspective of PASOK it still clarify some things.PASOK said the truth, that Greece had been lying, you don't do that unpunished in Greece. It is against the national interest, it is un-Greek, they were traitors collaborating with the others. The citizens reacted promptly, also PASOK's own voters.It explains why all citizens want Andreas Georgiou punished.It highlights why there is still so much fat in the citizens pockets. 120 billion EURO new debt from 2004 to 2009, thereof 36 billion in 2009 alone. This happened without any improvement in the country's productive capacity, on the contrary.It ridicules the voices calling for stimulus of the Greek economy, that has failed each and every time.Lennard